Good morning

The headlines:

  1. Currency wars.

    Link: profit from them.

    I do love a commentary about Currency Armageddon: the theory being that the Central Banks have tried everything but devaluation to stir their economies out of recession.

    The trouble is, because currency value is relative to other currencies, your devaluation is always at another country’s expense. Or to put it another way, if everyone tries to devalue at the same time, nothing will devalue. Hence a currency war, where you just want to devalue more relative to everyone else.

    But that’s not really the issue for investors, being the ever-opportunistic parasites that we are. We just have to decide who will win, who will lose, and what asset class will remain above it all.

    After 2008, the world’s bankers generally agreed to be gentlemanly about maintaining the currency status quo. But recently, Sweden, Japan, Hungary and Switzerland have started talking about currency devaluation. Japan seems to have actively enacted it. The Euro folk have begun worrying about the strength of the Euro. And China has always been Chinese about the renminbi.

    And even the Bundesbank has warned of the rising threat of currency wars.

    According to the article, investors should look to three places: small countries whose currencies are easier to devalue, countries that are fundamentally weak already, or gold. I think that he means “invest in those countries” rather than “hold the currency of that country”.

    My personal vote is still with the US dollar. And my reason for that is “economic fundamentals” are more of an illusion by which asset managers justify investments. When you look at the actual money flows, I think you’ll find large institutional investors with very specific investment mandates detailing how much of an asset class needs to be invested in.

    The money-in and the money-out are the key determinants of the demand and supply curves for an asset class. So if you’re aiming to go long-term – look to those flows.

  2. Apple.

    Link: topping the popular news of every website.

    Apple is doing less well than expected. And everyone is interested.

  3. Paul Ryan.

    Link: the Republicans have a goal.

    Paul Ryan, the House Budget Committee Chairman*, has said that the House Republicans would like to “force” “a big downpayment on the debt”.

    Yes. But that’s not news though, is it? Because the real issue has always been “how”. And I think that Paul Ryan and the Romney talked a lot about removing loopholes from the tax system – so why not do that anyway? It’s not like those loopholes have gone anywhere.

    Or was that only if they won…

    Oh – and Paul Krugman managed to maintain his cool, and respond with this article, where the kindest phrase was “Ryan’s raw dishonesty”. Love it.

    *it sounds better than former-VP-candidate, right?

  4. South Africa’s inflation.

    Link: have you seen the Rand?

    South Africa’s inflation went up to 5.7% in December. And seeing as the MPC meeting is tomorrow, the repo rate isn’t expected to change.

    Of course, the weakening of the Rand is mostly responsible for that – so decreasing the interest rate is unlikely to change it.

That’s all for now.

Have a good day.